Yield on Cost Calculator
Calculate the true dividend yield based on your original investment price to track long-term performance.
What Is a Yield on Cost Calculator?
A Yield on Cost (YOC) calculator is a specialized financial tool designed for dividend growth investors to measure the dividend yield of a security relative to its original purchase price. Unlike the current dividend yield, which changes daily based on the stock's market fluctuations, yield on cost remains anchored to your initial investment. This metric is crucial because it highlights the growing power of passive income over time. As companies increase their dividend payouts, your yield on cost rises, even if the stock price goes up. This calculator helps investors visualize the long-term benefits of holding quality dividend-paying stocks. By inputting your cost basis and the current annual dividend, you can see exactly how much cash flow your original dollars are generating today. For many long-term investors, seeing a YOC of 10%, 20%, or even 50% provides the psychological fortitude to stay invested during market volatility. It is a retrospective performance metric that honors the "buy and hold" philosophy. Understanding your YOC allows you to compare the income generation of your older positions against new investment opportunities or fixed-income instruments like bonds or U.S. Treasury bills.
How the Calculator Works
Our Yield on Cost Calculator uses a straightforward mathematical formula to determine your personalized yield. The formula is: (Annual Dividend per Share / Original Purchase Price per Share) x 100. For example, if you bought a stock ten years ago for $50 per share and it now pays an annual dividend of $5 per share, your yield on cost is 10%. This is true even if the stock currently trades at $200 per share (where the current yield would only be 2.5%). The calculator also allows for an optional "Number of Shares" input. When provided, the tool calculates your total annual dividend income, giving you a clear picture of your actual cash flow. This is particularly useful for retirement planning, where knowing your total projected income is more important than percentage points. The logic is handled entirely within your browser for privacy, ensuring your financial data never leaves your device. It processes inputs as floating-point numbers and outputs a rounded percentage to two decimal places for professional accuracy. By using this tool, you can quickly audit your entire portfolio to see which legacy positions are doing the heavy lifting in terms of income production.
Why Use Our Calculator?
1. Long-Term Performance Tracking
Traditional brokerage statements often focus on capital gains or losses. However, for income-focused investors, capital gains are secondary to the income stream. Our calculator shifts the focus to what matters most: the return on your initial capital. It helps you see how a stock you bought years ago is now yielding double or triple the market average based on your original entry point.
2. Dividend Growth Visibility
Dividend growth is the "secret sauce" of wealth building. By tracking YOC, you can see the direct impact of dividend increases. When a company raises its dividend by 10%, your yield on cost also rises by 10% relative to its previous value. This tool makes that growth tangible and measurable.
3. Better Reinvestment Decisions
Should you add to an existing position or start a new one? By comparing your YOC with the current yield of other stocks, you can decide where your next dollar is best deployed. While YOC shouldn't be the only factor, it provides historical context that current yield lacks.
4. Inflation Protection Analysis
If your YOC is increasing faster than the rate of inflation (tracked by the Bureau of Labor Statistics), your purchasing power is growing. This calculator helps you verify that your dividend portfolio is actually beating inflation over the long haul.
5. Psychological Resilience
During a market crash, stock prices plummet, which can be scary. However, if the company maintains its dividend, your Yield on Cost remains the same. Seeing a high YOC reminds you why you bought the stock in the first place and encourages you to hold through the downturn.
How to Use the Yield on Cost Calculator
Using this tool is simple and takes less than a minute. Follow these steps for an accurate calculation: First, locate your trade confirmation or brokerage history to find the original price you paid for the stock. This is your "Cost Basis per Share." Second, find the current annual dividend. Most companies announce this quarterly; simply multiply the quarterly payment by four. Third, enter these values into the respective fields above. Fourth, if you want to know your total cash flow, enter the total number of shares you currently hold. Finally, click the blue "Calculate" button. The result will instantly appear, showing your yield on cost as a percentage and your total annual income in dollars. If you are looking to calculate more complex scenarios, you might also want to check out our Dividend Reinvestment Calculator to see how your YOC could grow if you reinvested those payouts.
Example Calculations
Example 1: The Legacy Tech Giant. Imagine you bought shares of a technology company in 2012 for $60.00 each. At the time, the dividend was small. Today, that company pays $4.80 per share annually. By entering $60 in the cost basis and $4.80 in the dividend field, the calculator reveals a Yield on Cost of 8.00%. Even if the current stock price is $150 and the current yield is only 3.2%, your personal yield is significantly higher.
Example 2: The Dividend Aristocrat. You invested in a consumer staples stock at $100.00 per share. Over 15 years, the company has raised dividends annually. It now pays $7.50 per share. Your YOC is 7.5%. If you own 500 shares, the calculator will show you are earning $3,750 per year in passive income from an original $50,000 investment. This represents a strong return that likely exceeds many other low-risk investment vehicles.
Use Cases for Yield on Cost
Yield on cost is most effective when used for Dividend Growth Investing (DGI). Investors in this space prioritize companies with a history of increasing payouts. YOC serves as the ultimate scorecard for this strategy. Another use case is Retirement Income Planning. When planning for retirement, you need to know how much income your portfolio will generate. YOC helps you project future income based on historical dividend growth rates. It is also useful for Estate Planning. If you are passing shares to heirs, understanding the YOC helps them understand the value of the "income machine" they are inheriting. Furthermore, professional portfolio managers use YOC to explain to clients why holding a "boring" stock for 20 years was a better move than chasing the latest trend. You can find more information on standardized investment definitions at Investor.gov.
Frequently Asked Questions (FAQ)
Is Yield on Cost the same as Dividend Yield?
No. Dividend Yield is calculated using the current market price (Current Dividend / Current Price). Yield on Cost uses your original purchase price (Current Dividend / Original Price). Current yield changes daily; YOC only changes when the dividend changes.
Can Yield on Cost decrease?
Yes. If a company cuts its dividend, your Yield on Cost will decrease. This is a red flag for investors and suggests the investment thesis may have changed. It is important to monitor your holdings for dividend safety.
Does YOC take into account reinvested dividends?
Standard YOC calculations usually use the initial out-of-pocket cost basis. However, if you reinvest dividends, your average cost basis changes. For the most accurate result, you should use your "Adjusted Cost Basis" which includes all money put into the position, including reinvested amounts.
Why don't brokers always show Yield on Cost?
Brokers focus on real-time market data to facilitate trading. YOC is a personal, historical metric that doesn't affect the current market value of your account, so it is often relegated to "performance" or "research" tabs rather than the main dashboard.
Is a high YOC always good?
While a high YOC is generally a sign of a successful long-term investment, it is a "sunk cost" metric. It doesn't tell you if the stock is a good buy *today*. You should always evaluate current opportunities based on their current yield and growth prospects. For more advanced tracking, try our Investment Growth Calculator.
Conclusion
The Yield on Cost Calculator is an essential tool for anyone serious about building wealth through dividends. It provides a unique perspective that market prices simply cannot offer, highlighting the efficiency of your invested capital. By focusing on YOC, you shift your mindset from a short-term trader to a long-term business owner. This calculator proves that patience and time are the most powerful forces in finance. Whether you are a seasoned investor or just starting your journey, tracking your YOC will give you the clarity and confidence needed to reach your financial goals. Start entering your positions today and see the true power of your portfolio's income-generating potential.